I don't have time to write up my own post board for work but I wanted to get something up about this before I left (so I can ) so I'm going to repost something someone wrote on another board (registration required to view):

Quote:

Originally Posted by Cthulhu

Aaand it's gone, .

Last week or so, the biggest (according to itself / the media) bitcoin exchange, Mt. Gox, shut off outbound payments while trying to fix a known bug (basically, it was possible to change the hash / key of a transaction; MtGox didn't know how to deal with that / didn't anticipate it). As a result, people couldn't get their money or bitcoins off of MtGox, and the price on there plummeted (taking the other markets along with it).

In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

But yeah. The developer(s?) behind MtGox were just completely incompetent. Have an annotated screenshot from the start of MtGox:

This contingency plan was leaked to the press, again underlining the theft that may have been going on for quite a while now; the plan there is to go offline for a month and reboot the service, rebranding it to just Gox. Apparently. Either way, they're in a lot of shit. The contingency plan went into effect today; the CEO, who is personally named as the person responsible for a lot of people losing a lot of money (apparently), will resign and probably go into hiding, and the company will do a complete reboot.

Edit: Also, that crisis strategy draft has a page of blacked-out stuff; those are the financial reports. Apparently you can just use copy / paste on the pdf to get the figures, censorship fail .

I don't think the value is done plummeting yet but it might not be a bad time to invest a certain amount of money once the value bottoms out. On the other hand who knows if this is the only forthcoming scandal about it.

None of this helps my feeling that BC is a scam using crypto libertarians as targets that legitimize and promote it. The original scammers are long gone and this is just another generation of thefts in a poorly thought out currency. I haven't kept close watch on it so this might all be talking out of my ass but in the early days of BC there were at least a few cases that appeared to be market manipulation inflating the currency and then vanishing. The whole concept around mining coins and giving early adopters more advantages seems fishy to me.

What's known for certain is that for being a crypto currency everyone is very trusting proving PT Barnum right. Silk Road and similar dark markets are a great example where more than a few markets made people put money into an exchange and then ran off with the coins claiming hackers. Even after the FBI nailed the creator of Silk Road people just kept dumping money into its offshoots as if the FBI never had access to large amounts of their data.

ETA: for those not in the know Silk Road was a darknet site built around connecting sellers of anything to buyers. Mostly grey or black market items especially drugs. It became known as a place to get extremely pure drugs sometimes in bulk but at a hefty price compared to street prices. Which does go to show that people are willing to pay for quality.

None of this helps my feeling that BC is a scam using crypto libertarians as targets that legitimize and promote it. The original scammers are long gone and this is just another generation of thefts in a poorly thought out currency.

A better analogy would be a site with an unintended backdoor that allowed the theft of credit-card numbers. You might like credit cards or hate credit cards, but how secure the credit card process is doesn't matter when the lynchpin gets handed to someone on a silver platter.

There could be something like bitcoin, with two important differences. First, the transaction and accounting means would be secure, to keep your bitcoin alternative alternative currency from getting ganked. Second, it could be based on something that represents actual value. Something like gold, only more useful. Something like... solar panels.

How would that work?

__________________Chained out, like a sitting duck just waiting for the fall _Cage the Elephant

There could be something like bitcoin, with two important differences. First, the transaction and accounting means would be secure, to keep your bitcoin alternative alternative currency from getting ganked.

Bitcoin does have secure transaction and accounting means... The stolen coins have surely been securely transacted and accounted by now. The transaction is safe, the coins weren't.

There's an entire forest of ways to prevent people from safely and securely transacting coins that aren't theirs -- which mgtox didn't use. Because:

Security is inconvenient. Locking coins in a crypto purse means you have to open the purse to use it. This often means the computer has to stop for a password or iris-check or what have you. Passing passwords securely to the web means shelling out money to buy an SSL certificate from some company with a snooty name. Some of these things can be worked around, but do you want to? Storing the password you need to get into someone's wallet is just as bad as not bothering with the password at all.

There's usually convenient and proper ways to manage crypto, but because of the way cryptographic keys work, they are counter-intuitive to most, either avoided or worked-around. I had a surprisingly hard time convincing someone that a fully-encrypted hard drive would need its unencrypted password put on it to boot if you didn't want to type in the encryption password every time you turned it on. And when they finally understood, they shrugged, nodded, and told me "Okay -- so put the password in it" as if that didn't turn this otherwise-formidable security into a rube goldberg machine, as if it wouldn't boot as readily for a mugger as him.

So the problem is that, much like boobs and fire, crypto makes people stupid.

To me there are four elements that fundamentally characterise Bitcoin.

It's a nerdy pyramid selling scheme.
It makes the detection of the selling and buying of illicit drugs and other transactions involving illegality very difficult to detect.
It's an excellent tool for laundering money.
Theft of Bitcoins is regular and the size of the stolen amount usually massive.

Can anyone think of any more reasons for which I really must have a Bitcoin account?

I've talked people out of bitcoin-as-free-money schemes, so it's not like I'm gung-ho about the subject. But it's funny that these are all things which happen every day with ordinary cash without raising eyebrows but somehow here they're all shocking and new? This is just business as usual for the human race.

Usually money isn't blamed for money being stolen, though.

For it to be a pyramid scheme there has to be someone on top, and there isn't really. It's more of a mob.

I haven't written it off. It might be useful someday. But I don't think just yet.

I like the idea of Bitcoin, I just don't quite identify with whatever unmet need it is intended to satisfy. From what I can understand, the bitcoin protocol is cool as shit. But for me personally, I don't have any use for it and don't really get it. It makes sense as a payment system, but I totally fail to grasp the speculative quasi-market dimension. That's not to say that I dismiss it entirely or don't acknowledge that it has its uses for other people - like Silk Road or whatever. It's just that right now, it is a weird combination of (1) super fucking sketchy and (2) RONPAUL Dollar-esque lolbertarian scamminess and (3) needlessly volatile to the point of pretty much being a game of chance.

I've talked people out of bitcoin-as-free-money schemes, so it's not like I'm gung-ho about the subject. But it's funny that these are all things which happen every day with ordinary cash without raising eyebrows but somehow here they're all shocking and new? This is just business as usual for the human race.

Usually money isn't blamed for money being stolen, though.

For it to be a pyramid scheme there has to be someone on top, and there isn't really. It's more of a mob.

I haven't written it off. It might be useful someday. But I don't think just yet.

It wasn't a pyramid scheme so much as favoring the early adopters - that was enough to make me suspicious. "Mining" got progressively more difficult as the number of bitcoins reached the limit. I learned about bitcoins 3 years ago (on the EconTalk podcast) and I think a large amount of the bitcoins were already mined. Had I jumped on it right then, I may have had a bitcoin or two, but probably not more.

I think the concept of bitcoin is new enough that people who acquired bitcoin didn't entirely know what to do with it, or failed to realize the "cash" nature of it. Nor did they realize that there's not really a central authority, and bitcoins are an international phenomenon.

Then they got all scandalized when they figured it out - sometimes the hard way.

I read an excellent article on HNN a few months ago about the history of private currencies and why they were eventually supplanted by government-sponsored sovereign money. If I find it I'll post a link, but this article covers some of the same points.

I turned back to the orange shirt and asked “What did the Bitcoin look like?” Bill chimed in and told the agent that what he was saying was impossible because Bitcoin is digital and doesn’t have have any physical manifestation. You can’t “see” Bitcoin. The orange shirt said they looked like medallions or tokens. I said I didn’t understand what he was talking about, and he simply repeated, in a child like way, that Bitcoins are like metal tokens. I told him that I didn’t have any tokens.

...Here’s what I think happened from their perspective. Obviously, the TSA has been trained, although poorly, to look for Bitcoin. They are apparently now trying to catch money launderers in addition to terrorists, and large tubes of tooth paste. My hoodie is probably what caught their attention, and everything after that received extra attention. When they saw all the metal lapel pins in my bag they probably thought they hit the jackpot on a stockpile of Casascius coins. Whatever training they had it probably included that stock photo of brass tokens everyone uses. My evasiveness only quickened their blood lust, as they imagined a big bust, and possibly a promotion down the security track.

I like the idea of Bitcoin, I just don't quite identify with whatever unmet need it is intended to satisfy. From what I can understand, the bitcoin protocol is cool as shit. But for me personally, I don't have any use for it and don't really get it. It makes sense as a payment system, but I totally fail to grasp the speculative quasi-market dimension. That's not to say that I dismiss it entirely or don't acknowledge that it has its uses for other people - like Silk Road or whatever. It's just that right now, it is a weird combination of (1) super fucking sketchy and (2) RONPAUL Dollar-esque lolbertarian scamminess and (3) needlessly volatile to the point of pretty much being a game of chance.

Funny you say that. I don't know if he promotes it or something, but the two people I know who use it are big Ron Paul supporters.

TSA has always looked for money laundering. I don't know whether I learned this at a librarian-related privacy thing or when I worked with a bank, but $20 and up bills have a strip inside them that is readable, or at least recognizable. The scanners in airports are able to detect if you are carrying more than $10,000 in cash and alert the TSA.

__________________
"freedom to differ is not limited to things that do not matter much. That would be a mere shadow of freedom. The test of its substance is the right to differ as to things that touch the heart of the existing order."
- Justice Robert Jackson, West Virginia State Board of Ed. v. Barnette

Japan has just decided that Bitcoin is not a currency, which subjects it to sales and income taxes. This is consistent with the view of the Canadian Revenue Service, which has found Bitcoin to be property and not a legal currency, and the United Kingdom, which leaning towards treating Bitcoin as a voucher and subject to VAT.
[....]
Bitcoin is property. When property is exchanged for other property, that is a taxable event.
[....]
So not only is a venue that takes Bitcoin taxable on the revenues (which should be no surprise), the owner of the Bitcoin that traded them in is also taxable if he has a gain on the Bitcoin relative to when he acquired them. How that gain will be taxed depends on whether he is considered to be an investor, a dealer, or a trader.

Oh, and what about Bitcoin miners? Their income from mining is also taxable on the dollar value of the Bitcoins received.

Despite all the hype, bitcoin is being treated as a value store, which is different than a currency, Even worse, the IRS will find tracking bitcoin sales easier.

HOW BITCOIN WORKSIt is a chain of blocks. Each block is a glump of bits which can be strafed into morgaboats. A calculation is performed. Everybody has the data so it is secure. Storfling the chain results in a unique tor-bot. Money goes in a box. The value depends on anime char

Did anyone but survivalist nuts think inventing a binary currency allowed them to say "suck it, capitalists, I'm never paying taxes ever again!" Did they seriously think that was going to work? Did they really believe "the man" was going to say "well allrighty then, you've outfoxed me fair and square, hie with this taxation business anyway"